Question 1

Car refinancing, what is it and how does it work?

Accepted Answer

Refinancing your car involves taking out a new finance agreement to pay off your existing loan and keep your current car. You might want to do this if you think a new deal could save you money or if your needs have changed.

Or, if you’re coming to the end of a PCP agreement and would like to keep your car, refinancing could turn the final balloon payment into more affordable monthly payments. Remember, extending your current loan over a longer term can reduce your monthly payment, but may increase total amount of interest payable.

Question 2

Does refinancing a car hurt your credit score?

Accepted Answer

Applying to refinance a car usually involves a lender carrying out a credit check. At first, we use a soft search to give you a quote. If you proceed, a hard search will be conducted which may impact your credit score. Over time, refinancing your car may boost your credit score if you are able to make your payments on time.

Question 3

Does refinancing lower your monthly payment?

Accepted Answer

Some people choose to refinance their car if they are able to lower their monthly payments. This could be possible if they are offered a lower interest rate or pick a longer repayment period. But remember, a lower monthly cost could mean paying more overall by the end of the agreement, depending on the car refinance terms. It’s important to look at the total cost as well as the monthly cost.

Question 4

Can you refinance a PCP agreement?

Accepted Answer

At the end of a PCP deal, you may be able to refinance the final balloon payment if you want to keep the car at the end but can’t pay the lump sum in one go. You may also be able to refinance a car during your PCP agreement to adjust your monthly payments. But, whether you can refinance your car under a PCP deal will depend on your agreement and personal circumstances. It’s important to remember that that spreading your balloon payment over a longer term can reduce the monthly payment but may increase the total amount of interest payable.

Question 5

How does refinancing a loan affect your credit

Accepted Answer

Refinancing a car loan may affect your credit in a few ways. A hard credit check can cause a short-term dip in your credit score. But, in the long run, refinancing your car could help you improve your credit over time if your payments are easier to manage and you are able to make them on time. As with any loan, it’s important to stay on top of your payments to keep your credit history in good shape.

Question 6

Do I have to start over if I refinance my car?

Accepted Answer

Refinancing doesn’t necessarily mean starting from scratch, it means replacing your current agreement with a new one. The new car refinance loan is used to pay off your existing loan on a monthly basis. So, while you’ll agree to new terms, you’re not re-borrowing the full original amount, just your outstanding amount.

Question 7

Why do people usually want to refinance their vehicles?

Accepted Answer

To keep their current car

To finance a balloon payment on a Personal Contract Purchase (PCP) deal

To lower their monthly payments (if eligible)

To see if they could secure a better deal

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